There is growing controversy among tax experts about how to treat these coveted freebies. The Internal Revenue Service also has been focusing on the topic, according to attorneys who practice in the area, examining whether the free food is a fringe benefit on which employees should pay additional tax.

The Journal report describes the conundrum the IRS faces when deciding how hard it should try to collect taxes on these fringe benefits. On the one hand, it’s not fair for cash compensation to be taxed while perks like free food aren’t. At the same time, taxing fringe benefits isn’t as simple as taxing cash compensation, and the law allows for exceptions, like when workers are stationed in remote locations where purchasing lunch isn’t feasible.

It makes sense that the IRS would be looking into these practices at this time, as fringe benefits are a growing component of employee compensation overall. According to a recent USA Today study, employee-paid benefits now account for 19.7% of total compensation, up from 16.6% in 2000 and less than 10% in the 1960s. One key driver of this phenomenon is the rising cost of health care. As health care costs have risen, many workers have received a larger percentage of their compensation as health care benefits.

But there has been a cultural shift as well — at least in the technology sector — which is encouraging firms to increase workplace perks. In October the New York Times ran an article on the perks increasingly offered by Silicon Valley, which argued that firms are doling out more and more fringe perks so that employees can spend more time thinking about work and less about nonwork responsibilities. The idea is that if your employer pays for your home to be cleaned or takes care of your child-care needs, you’ll come across fewer of the “work-life balance” problems that plague corporate America today. The goal is to achieve less “work-life balance” and more “work-life integration.” “‘Life-work balance’ is a nonsense term,” Andrew Sinkov, 31, a vice president of marketing at Evernote, told the Times. “The idea that I have to segment work and life is based on some archaic lunar-calendar thing.”

So it may be that the increasing value of benefits paid to employees really is just a way for employers to get more out of their workers than a way to avoid paying tax. But the IRS isn’t going to just forgo this lost revenue. According to the Journal report, the feds are considering cracking down on companies that are giving out fringe benefits without withholding taxes. The result would be firms having to increasingly list benefits on workers’ W2s and higher tax bills for employees at the end of the year.

Of course, if the IRS does really start to crack down hard on this sort of practice, one could imagine many employees bristling at paying taxes on noncash benefits. The Journal report says when this has happened in the past, employers have ensured their employees “don’t lose out by giving them extra pay to cover their larger tax bills.”

But this surely isn’t a solution to the problem on a large scale because it’s just an inefficient use of funds from the employers’ perspective. Essentially these firms are paying employees’ income tax for them, just to ensure that those employees eat lunch in the company cafeteria or take advantage of free child care. For some companies that really want their workers to be on campus for long hours each day, this strategy may make sense. But in the face of a widespread effort by the government to collect taxes on noncase compensation, it will be much easier for firms to just offer their workers higher salaries and fewer benefits.

Is this a joke? The lunch is already taxed when the company purchase the lunches isn't it? Is it because the companies are writing them off when they report?

It's comparable to putting a tax on refrigerated water at the office because keeping it cold is a perk when you only really need to have access to regular water from the sink.

This also sounds like a headache to police, do they mean to sign employees up to some sort of opt in program for free lunches and track it that way? Isn't it going to get a little awkward the way most tech companies offering these perks tend to work as teams? So a server just went down and you suddenly find yourself having to put out a fire but you can't grab a sandwich because you didn't opt in? I'm really curious as to how this works at all without the lunch ending up not being "Free" in the long run.

I think the companies are the ones to fight this battle, because I personally couldn't care less about free lunch. But when that critical error pops up, sorry, looks like I have to go out for lunch instead of sitting at my desk and putting in at least another 45 mins uninterrupted while I eat.

So "free lunches" are a loophole that the IRS wants to cover - but not the loophole that allows corporations to move money off shore so their tax debt is nearly 0%? (and BTW the Evernote perk of getting your house cleaned, is taxed)

It's a difficult issue. Years ago I was doing contract work at a pasta factory. They had a free lunch every day. Because they had a free lunch they were able to give employees just 30min for lunch, if they didn't give a free lunch they needed (union workers) to give an hr lunch. They gave the free lunch because it benefited the company...how can you justify taxing that as income?

Last place I worked at it was common to take supervisors out to lunch, usually at Steak and Ale of similar, every month for a little one on one relaxed work related talk. Was that income for both of us? In my book we were working.

Now you want to talk about a CEO that has an in house nanny or executive dining room with a personal chef? That's different.

I lived on the Company credit card for 40 years. It is nice. Food,room, gas,truck,air fare.. But the rule should be 50 miles from home or more on the Job for the Company to pay. They want you there they see you are fed there. But a regular job bring your own lunch to work and clean your own home. Less than 50 miles you can drive yourself to there job. and bring a lunch with you.

Food and beverages (or any lunch bought from a restaurant) is already taxed when the company purchases it. So the proposal is really one for double taxation. Once when the company purchases the lunch or food for the employee and then again as a so called "benefit" when the employee eats the food provided. What's next, taxing employees for the water provided as a "benefit" at the water cooler.

The taxing solution is easy. Require the companies to give cash-value cards that will be used to "pay" for the free cleaning, the free lunches, etc. The value of the gift card is included in the employees' compensation and is taxed.

I see where this is going already. The wealthy CEOs will say that it is not fair to tax their huge bonuses, jets, club memberships and cars without taxing the meals that the working people get. The solution will be to just not tax the CEOs. I suggest a tax on benefits with an exemption for benefits below a certain amount. It is time that the wealthy start paying their fair share. By the way, I have no problem taxing the three martini "business" lunch from a five star club.

@bobfranklin The rest of us do exactly that. We pay for our food with our "after tax" dollars, plus we pay the sales tax. Company paid lunch while at the "home office" is most definitely a form of compensation.

@TSReviewer so how will that work with a refrigerator stocked with sodas, juices and bottled water? And why should I pay the same amount in taxes for that when I drink one drink per day and Elsa the cow, in Marketing, drinks over 8?

@ThatSmithgirl When spouting statistics, one should be sure to be using them properly lest you be considered less than intelligent. If you compare % of tax revenue to number of wage earners - it is an invalid comparison. You need to post % of income earned vs. taxes levied. For example you might say "Those that earn 43% of the income pay 71% of the taxes". It may not sound as dramatic, but at least it's honest. By the way, the top 10% of workers earn 43% of all income. The bottom 50% of workers earn 13% of all income. When it is rephrased that way, do you still think that 'fair' is a concern?

To help you better understand, look at Table 6. In 1980, the top 10% of taxpayers paid under 50% of the total tax. In 2010, the same group paid 70% of the total taxes collected. In 2010, the top 25% paid 87% of the total taxes collected.

Oh, and if yo uwere referring to the very wealthy, the top 1% paid 37% of the total taxes collected in 2010, and the top 5% paid 59% of the total taxes collected.

By the way, while I am middle class, I am definitely NOT part of the wealthy class you think should be taxed more.

There is exactly zero moral or philosophical justification for charging some more than others for the exact same government we all have in common—taxation as a percentage of income is sheer, cynical, opportunistic, greed on the part of government.

If your objective is truly to soak the rich, at least do so on the philosophically justifiable basis of economic footprint, a consumption tax, that more accurately reflects the cost to society of supporting the presence of particular individuals.

@citizenWI what they actually pay is very low, regardless of their stayed tax rate. If they have 98 percent of the money, why aren't they paying 98 percent of the taxes?. Many corporations pay no taxes, such as GE.

@HenryMiller @citizenWI Before you call parasite on human beings, perhaps consider what other benefits low wage earners provide top society? Like, serve hamburgers, clean houses care for elderly, ... We have government to make sure that we all can benefit from society together, and we all do some fair share together. After all, the most limited resource is the lifespan of a human being, not the score keeping mechanism we call "money." But it's likely you already know this and are stirring the nest. Can't believe I'm spending time posting this, really...

@HenryMiller@citizenWI and it takes less than 1tenth of 1 percent to supply the needs of the individual 1% to survive while it takes damn near 90% of income for the bottom %50 to survive....now talk about fair share...